BusinessLDN suggests investor-backed vehicle to fill gap left by housing associations
The Greater London Authority should establish a vehicle to buy up unwanted section 106 homes, according to a business advocacy group in the capital.
According to a report by BusinessLDN, financial pressures on housing associations has led to a “section 106 logjam”, with building stalled as housebuilders struggle to find buyers for affordable homes.
The briefing note, which was written in partnership with DS2, specialists in viability and affordable housing, said due to issues with the process “schemes are either taking significantly longer to progress to construction or simply not being built at all”.
“While two years ago there were normally at least half a dozen registered providers willing to bid competitively for affordable housing opportunities in London, in many cases this is now down to one or two and in many cases none,” it said.
“If there are no appropriate offers for the affordable homes, then development can come to a standstill despite the schemes having planning permission and being financially viable.”
One of the organisation’s bolder suggestions was for the GLA to create a vehicle, backed by institutional investors, to purchase section 106 homes that cannot be sold via the normal process and to manage them to provide long-term housing for Londoners.
More than 40% of affordable housing delivery in recent years has been through section 106 agreements, which require developers to ensure a minimum percentage of affordable homes in schemes as a condition of planning. A housebuilder will typically forward sell the affordable units to a housing association, who will manage them.
However, cash-strapped housing associations are increasingly shifting from section 106 deals towards their own ‘land-led’ schemes in order to have more control over design, construction, service charges and costs.
Other suggestions from BusinessLDN were for local authorities to receive the cash equivalent of the affordable homes as a form of payment in lieu, which could be used to support the authority’s own affordable house building programme
BusinessLDN also suggested that councils could expand the approved list of registered providers that can be utilised by developers.
In the long term, it said, central government needed to provide certainty about a future rent settlement and its Affordable Housing Programme.
No comments yet